Bitcoin Cometh

The last few months have seen Bitcoin transition from a fringe activity to a very mainstream one, culminating recently with the currency dramatically falling in value after being banned in China, then being taken seriously by US regulators.

So why is Bitcoin suddenly so popular? And why do some people dismiss Bitcoin as a giant Ponzie scheme. To answer those questions one needs to understand some of the basic charecteristics behind Bitcoin. Bitcoin is a decentralised currency that works rather in the manner of a peer to peer network. Instead of having a bank in the middle, holding the accounts centrally of a network of clients, Bitcoin transations are sent to and held by each client. There are several consequences of this. People can transact with each other without a central authority so the transactions are much cheaper. Already there are online shops springing up that are selling products in exchange for Bitcoin that are undercutting prices offered by competitors that only trade in conventional currency. (See https://www.bitcoinstore.com/ as an example - there are more). It also requires no authentication beyond the exchange of a Bitcoin wallet address. This means that transactions can be made anonymously. Famously this characteristic has drawn criticism in the press because it provides a means by which criminals can exchange payments without detection. The biggest example of this was the Silk Road website which was selling illegal substances online in exchange for Bitcoin. The organisation was busted and its Bitcoin stash, which was valued at millions of dollars was confiscated. Tanatalisingly though this characteristic offers a financial future that could eliminate the need for banking. Imagine that Bitcoin was widely accepted as a payment and employers were paying staff in Bitcoin (which is happening already See the CNET story of the Kentucky police cheif being paid in Bitcoin)

So what about the downsides. Bitcoin works by having a mathematical algorithm that controls the amount of coins in circulation. Coins are created by mining, a process of code breaking that is cleverly designed to become harder as more coins are found. In the end there will ever only be around 21 million coins. The distribution of Bitcoins is therefore favoured by early adopters and those with limitless computing power. Had you been grinding out coins in 2009 when Bitcoin was new and coins were easy to mint and worthless to trade at the time you may have mined coins in a relatively short space of time that today would be worth millions of dollars. Today it's far harder to mine new coins. The price of a Bitcoin is 611 USD at the time of writing. Parallels are made to gold, since as a store of value, the limited quantity of Bitcoins makes them an ideal commodity to trade, and unlike gold and silver which are physically difficult to move about, Bitcoin is frictionless and easy to transfer. There have been some high profile stories of Bitcoin theft and flaws in the Bitcoin architecture have been reveled and fixed as a result. The plain fact is that crypto-currencies are young and immature so teething problems will occur, but those with insight into underlying programming are assuring us that Bitcoin and its derived bretherin (which now number in the hundreds) will eventually prevail over physical currency. The following video is a simple introduction to Bitcoin.

Rather than risk real cash, there are other ways to get Bitcoin, either by working or gambling. Here are some links to places where you can get free Bitcoin:

BitVisitor This is a website that lets you earn Bitcoin in return for visiting websites

Bitcoin4U Another site that pays Bitcoin in exchange for visiting websites.

Can Has Bitcoin?A retro looking free bitcoin site. Much like many of the other sites listed, enter your bitcoin address, solve the captcha, and get some free bitcoin.